Entry Strategies and Methods

[fxmarkets]

hmm what about humans making the decisions, I mean do we think the markets are random ?

so why not base an entry around a non random event. ie identifying the shift in market perception of perceived value at price x

I take the point about autotrading simple strats with some kind of atr vol stop and probability over time yields x .. but for those maybe who think the markets are non random, entry is important in my view.

well its not so much as important but youd be stupid not to use it. as its fits a good template for a low risk, high probability trade opportunity. .

but its not based on machine , and I dont know what they are trying with neural nets and the such, but i can see why machines cant cope, with great entries, as they can be too rigid on entry, you of course use rigid stop on discretion but the entry and exits are dynamic to price, but not behaviour, that i see as repetitive, non random, to match the market, that to me just makes sense.

Ive not be told this its what ive discovered.. and its taken some time.. is there more? i'm open to it.

I guess its down to difference of perception.

some in camp A others camp B all can potentially make profit, perhaps its down to individual choice as to whats suited to whom ..

 

[FXSCALPER2]

If I were half as good at exits as I am at entries, I would make millions in no time. I think entries are easy, it is exits that make or break you.

 

[Charlton]

Entry vs Exit

Wow

I thought my thread was range-trading and it’s suddenly hit a bull-market ! Thanks to all for their contributions

MaximusDollarus – Your 4 criteria are a useful starting point, but I guess as a scanner they would yield too many hits, especially since you appear to use fundamentals for the final entry decision. Do you use any other filters ?

Timsk – I do not wish to diminish the importance of trade management, money management and exit strategy and I am currently working on my trading plan to get this right. I think the point I was trying to make is that this process is focussed. You own the stock and, if as you rightly say, it is well traded according to a predefined plan you stand a chance of making maximum profit or minimum loss. For me the entry seems much less focussed – you have thousands of stocks to choose from and even with good filters there may be many buy candidates. I cetainly agree that once you are in a trade then your Trader B exit expert strategy must then kick in.

Spitlink – Your comment about entries close to stops is interesting. I assume you mean something like: if I am trying to trade within a channel I would be positioning my stop around the support line and would be looking to buy just above i.e. close to the stop for maximum profit. So I think that what you are saying is that the stop position is always determined before the entry point and not vice versa. I never thought of it that way round before.

Dbp/Timsk – I also support the Trading Plan Template and I might publish mine when complete, having removed all the personal bits about how I would reward myself for following it to the letter !

Barjon – Whilst accepting fully the idea that there must be an associated exit set-up or strategy, is the exit purely mechanical or will there always be a discretionary element ?

Disqplay – Thanks for the ideas. Yes it’s that final crap shoot which is the point I made above about the difficulty of focus during entry. Do you actively analyse your entry decisions to tune them or are you content to just use stops and exit strategy ? Do you just use a fixed 5% stop or do you take into account the specific characteristics of the stock, the current trading conditions and how long you intend to stay in the position etc

 

[Spam Man]

If I were half as good at exits as I am at entries, I would make millions in no time. I think entries are easy, it is exits that make or break you.

Total nonsense. If your entries are that good then just set an equidistant stop and limit. Relying on exits means you have no edge. Don't take this personally.

 

[FXSCALPER2]

Total nonsense. If your entries are that good then just set an equidistant stop and limit. Relying on exits means you have no edge. Don't take this personally.

Not at all mate. Stop are about exits, profit targets are about exits. You clearly think trading edge is about entries. Is it? If you can cut your losses and let your profits run, you will make money. What do you think that rule is about? Exits. I happen to be good at entries, but I will swap with a method with good exits. This is, of course, my opinion and you may be right :|

 

[fxmarkets]

Total nonsense. If your entries are that good then just set an equidistant stop and limit. Relying on exits means you have no edge. Don't take this personally.

yeah or chuck a golf ball at the sell button........ if you want to randomize it a bit.....

 

[Spam Man]

You clearly think trading edge is about entries.

It is, to a large extent - contrary to what you read in your Van Tharp book, or whatever.

Seriously, if your method does not make money at a 1:1 risk:reward then you may as well toss a coin - unless you have a good reason why you think you pick up a lot of fat tails. Good exits, or trade management, or whatever you want to call it, can smooth out the equity curve at best.

yeah or chuck a golf ball at the sell button........ if you want to randomize it a bit.....

Eh?

 

[fxmarkets]

ohh with the golf ball, the thread was debating good entry over any entry with great exits, trader A and B, now trader A with his good entry, because of this, could chuck a golf ball at the sell button to exit and take whatever based on when the ball hit button. random exit but likely to be profitable because of good entry.. over someone who has terrible entry but great exits??

tongue in cheek, with the golf ball sort of. but if the entry's that good, as you suggest just have stop 8 limit 8 or whatever.... how hard is that to exit........

 

[silviaic]

I claim to be consistently profitable and I do believe any idiot can enter a trade, the clever bit is the exit. I have code in TS that illustrates this point nicely by generating a random directional entry and uses mm to exit. It is profitable across many markets. In addition, all of the systems I run live have far simpler entry than exit criteria.
I think the fact that some people are successful and claim to use astrology and all that b*ll*cks for their signals points to them being good money managers and it is my opinion that you can use just about any consistent entry criteria so long as it is discplind and consistent. It is all about knowing how to size your trade and knowing all your outs.

I agree, and I'll add that money management is vital. I did the same kind of simulation concentrating on money management, with various positions and different outcomes. One of my simulated traders had a 40% chance of choosing a trade with a positive outcome. The positive outcome had an average return of 3%, with a not very spread range (10% return was very rare). I don't remember now what kind of distribution I chose, I think it was asymmetric, with most outcomes around 0-3%. Anyway, a good mm plan gave my trader a positive return on the long haul. Once I saw that, I decided this is a game that ought to be played. One trade doesn't mean anything to me. Not even two trades. There lots of false breakouts-breakdowns. I agree that with time one gets even more skilful, but an 80% probability trader with lousy mm (ie, not knowing the risk he's taking) doesn't get far and gets broke by he rare event that goes badly against him.But he's got it, right? He's virtually always right! In particular, risk management is fundamental when you're using margin. Eventually 80% trader will learn the importance of good mm and will appear in market wizards, and can post here and we'll all open our mouths in amazement. I think both entry and exit are important, and they should be part of your money management plan. After all, in the same way you have bad spells you have mighty good ones, and you want to be there when they happen. Meanwhile, you learn how to polish your entries, how to polish your exit, and then when the time comes, you can take a higher risk because you've became the 90% probability trader. I think some people are naturally good at entries, others not but learn on the way (by the way, tescht and maximus, your contributions about entries is of great value for this reader ) Others are naturally good at exits. Other are naturally good at managing risk. And everyone eventually gets to know what they need to learn. I learnt not to belittle any weaknesses just because they're 'beginners' weaknesses. I try to never forget than I am a sucker playing a sucker's game. Somehow that makes me a better trader

Good trading!

Silvia.
(entries are a essential part of the game, after all if you are not in you won't worry about getting out. But they're not the only ones to decide if you are going to be the winner...)


(By the way, just in case you look this way, I'm not interested in babies at the mo )

 

[TWI]

I think you are a little crazy if you do not look for edge in entry and exit. Previous point was made since I have simulations that can randomise entry and still make a return due to money management, I have not seen a system yet that makes money by systematic entry and random exits.
I also believe that the importance at each side of the trade varies with timeframe. The shorter the trade timeframe so the more important the entry criteria. For day trading system entry is probably the most important part as a lot of these systems have static exit criteria such as number of bars, points or set time since entry. As the trade timeframe increases however so the importance of the exit. If you think about it this does make sense. This of course is just what I have found in my own trading and may not be the case for everybody.
The other integral point which is arguably the most important bit is how to size the entry and how to scale in and out. It can make a huge difference to your net results if, rather than just doing a consistent clip size you scale your trades based on some money management principle. Providing you have positive expectancy i.e. you have found a consistent edge, it is all about size after that.

 

[fxmarkets]

hmmm, I just dont get it tell me why its not beneficial to have great entries?

Can we get one thing discussed cleared up holding the above in mind, do people here think the markets are random.

 

[silviaic]

Didn't see all the other posts coming after, I started my post yesterday evening and I just finished this morning. I see there is a fight going on in here...great. :-/

Good trading guys.

Silvia.

 

[fxmarkets]

no fight, just discussion silvia and all, when you are developing methods do you hold in mind or go with the markets are random when deciding on how, when, why to enter a trade.

I mean what makes you think you are about to take other peoples money and this is the best probability "here" for that objective to get underway.

 

[silviaic]

I use a lot of my guts. My brain gets information and processes it, and I got there more than I can write with an indicator. I use very simple indicators, and I concentrate in the price chart. I don't care if the markets are random or not, and I don't think that I'm taking other people's money. I see it like a game. They're numbers coming though my screen and charts printing in my software. They're just number and a dynamic line. I decide to enter a trade when it is above the 200-ema (but in some cases where I feel/think this looks real good) I enter below the 200-ema. I enter when prices like to use the 12-ema as a bouncing chair. I'm very wary of volume because sometimes what prints as a book trade is a trap. So all those things put together plus all the other ones I can't rationalise that I call guts, make my entry. If they're random or not doesn't make any difference. May be the problem here is that I don't understand what you mean by random. Does it mean that you can't make money in the stock market? Then it is not random. Does it mean that some percentage of patterns are not predictable? Then it is not random. Does it mean that it goes up and down? Then it is random. I never understood really what people mean by random...

Silvia.

 

[fxmarkets]

By random I mean relating to an event in which all outcomes are considered to be equally likely to happen. so when trading do people base the method on random market theory hence maybe or do people use Non random outlooks looking at markets ie. theres a sense of purpose to markets that doesn't depend or rely on chance but has order to it.

hmm I dont know maybe people dont think about it too deeply, but if you are non random camp then by definition you/we should seek entries and exits based on the logical order of the market.

 

[dbphoenix]

Fx, lots of people have fabulous results in simulations, none of which are in the least pertinent to the results one achieves in real-world, real-time trading.

If Charlton thinks he can achieve a consistently profitable record trading by following the advice to trade with his "guts", then that's really all that matters. More power to him. But while he's thinking about it, he needs to have a substantial supply of large grains of salt at hand.

As for randomness, the markets are random to the same extent that human behavior is random. And, again, most people base their views on what they've read somewhere, not on what they've personally experienced over years.

--Db

 

[Splitlink]

Of course, exit is important, but a good idea of where you want to be out of the trade if it moves against you at the start is the first priority. That tells you where to place your stop so as to exit with a minmum loss and the entry is whatever risk you are prepared to accept away from that point. Planning whether the trade is worth entering in the first place has to be done, too, to decide whether it is worth the risk but, apart from that first calculation, I don't plan my exits any further. I, certainly, don't calculate how many points I want to make and "click", close out like that.

Split

 

[Grey1]

I need advice. I have read a fair bit about TA and it seems that exiting a stock is relatively easy - use stops, look at price, patterns or indicators. But it strikes me that the entry decision is much harder. With thousands of stocks to choose from I would like to know:

(a) How do you decide which ones to monitor
(b) How do you monitor them
(c) What entry signals are you looking for

I'm looking for advice on strategies, practical methods and tools - especially for UK stocks, EOD trading, positions 1 day upwards. I'm after simple practical methods to start me off, that I can build on later.

Entry is far far more important than exit. Risk analysis starts with entry .

Do I read all over the Internet that exit is the key to trader's success ? yes i do .. but these people have zero understanding of risk analysis ..

Grey 1

 

[Grey1]

By random I mean relating to an event in which all outcomes are considered to be equally likely to happen. so when trading do people base the method on random market theory hence maybe or do people use Non random outlooks looking at markets ie. theres a sense of purpose to markets that doesn't depend or rely on chance but has order to it.

hmm I dont know maybe people dont think about it too deeply, but if you are non random camp then by definition you/we should seek entries and exits based on the logical order of the market.

If market was random then what would we all be doing on this site then ? Random thinkers are better off on Roulette table , at least they get a free cuppa tea there '

We can not have " random camp " traders

 

[dbphoenix]

Entry is far far more important than exit. Risk analysis starts with entry .

Do I read all over the Internet that exit is the key to trader's success ? yes i do .. but these people have zero understanding of risk analysis ..

Grey 1

Oh, c'mon, Grey. How many beginners bother with risk analysis?